When insiders at small companies are spending substantial amounts of money on company stock, it’s often worth taking a closer look. Research shows that insiders at small firms tend to earn greater profits from their purchases of stock than insiders at large firms do.
In this report, we are going to highlight some insider buying at a small US company Associated Banc-Corp (ASB:US). Associated Banc-Corp is the holding company for Associated Bank, which has branch operations in Wisconsin, Illinois, and Minnesota, as well as commercial financial services in Indiana, Michigan, Missouri, Ohio, and Texas. The bank, which has over 1.3 million customer accounts, has been the leading mortgage lender in the Midwest for the last decade. The company is listed on the New York Stock Exchange and currently has a market capitalization of $3.4 billion.
Associated Banc-Corp: Insider Buying
Our data shows that on October 26, board member John Bergstrom bought 50,000 ASB shares at a price of $23.00 per share. This trade cost the insider $1.1 million and increased the size of his holding to 143,259 shares.
Mr. Bergstrom – who joined the company's Board of Directors in December 2010 – is an experienced businessman. Currently, he is Chairman and Chief Executive Officer of Bergstrom Corporation of Neenah, Wisconsin – one of the top 50 largest automobile dealer groups in the US. He also serves as a director of Kimberly-Clark Corporation, WEC Energy Group, Advance Auto Parts, and is an emeritus director of the Green Bay Packers, Inc. Given his background, he is likely to have a good read on the company’s prospects.
What stands out about this trade from Mr. Bergstrom is its size. The fact that the insider has spent over $1 million on stock, and increased the size of his position by 187%, suggests that he is very confident the stock is set to rise.
Positive Revenue Growth Trends
Associated Banc-Corp’s Q3 results were good, driven by positive revenue growth trends.
For the period, the company posted net income available to common equity of $85 million, or $0.56 per common share, versus $40 million and $0.26 a year earlier. Net interest income after provision for credit losses amounted to 207.7 million, up 49% year on year. During the quarter, the group repurchased $60 million worth of common stock.
"Our third quarter results were driven by expanding revenue trends,” commented President and CEO Andy Harmening. "We saw increasing signs of business confidence during the quarter. Average commercial and business lending (excluding PPP) loans grew by over 3% from the second quarter. Net interest income and noninterest income also increased, and coupled with disciplined expense and capital management, we delivered a return on average tangible common equity of over 12.7%,” he added.
Since these results, the company has announced another share buyback program in which it will repurchase $100 million worth of shares.
In light of these developments, we see the insider buying here as a bullish indicator.